Sunday, January 13, 2013

Calif. counties suing big banks for rigging interest rates

Some will rob you with a six-gun,
some with a fountain pen. 
Antitrust lawsuits against banks for rigging the LIBOR interest rate were filed in three federal courts last week by San Diego and San Mateo counties, the city of Riverside and the municipal utility district of Oakland.

We told you about the LIBOR lawsuits last fall, which claim the criminals who rigged LIBOR cost American taxpayers billions of dollars.

Here's why: LIBOR (the London Interbank Offered Rate) is used to set the terms for interest rate swaps, which many state and local governments entered into. The rate rigging lowered returns on financial contracts that state and municipal governments entered into. For example, small governments entered into interest rate swaps, which lowered the cost of their debt. If LIBOR was rigged to be lower, those governments receive smaller payments.

So now California governments are joining in the lawsuits against the banks. (Baltimore, for example, is leading a class-action suit against banks including Barclays, Bank of America, HSBC, JP Morgan and UBS.)

And Alison Frankel, writing for Reuters, tells us that,
The Los Angeles County Employees Retirement Association, represented by Bernstein Litowitz Berger & Grossmann, filed a class action on Dec. 21 that included allegations based on the UBS materials.
She writes the new suits "portend messy complications for the banks."

What a shame.